Electric cars are great. They’re unbeatable with gas mileage, saving the owner time and money, and most people feel they’re better for the environment. But all the benefits pale in comparison to the one major drawback of electric cars — they can kill.

Battery-powered cars are quiet — too quiet some argue. Pedestrians cannot hear the cars approaching, something that the visually impaired rely on. The issue was serious enough for the National Highway Traffic Safety Administration (NHTSA) to issue a report on the matter, which found that hybrid electric vehicles “have a higher incidence rate of pedestrian and bicyclist crashes than do ICE [internal combustion engine] vehicles in certain vehicle maneuvers.” A recent New York Times review of the electric Ford Focus calls it “Deep-space silent, the quietest of the many electric cars I’ve driven.” That’s a problem.

A silent car puts pedestrians, cyclists and the National Federation of the Blind in an uproar, as it should. To help solve this issue, the Pedestrian Safety Act of 2010 was enacted, forcing the NHTSA to initiate a rule-making process for minimal vehicle noise. That’s fine going forward, but what about the fleet of quiet, electric cars already on the road? They could be considered to have a fatal flaw. And what if car companies are reluctant to manufacture cars with such a feature?

The response of the industry was clumsy. Many, including Honda and high-end manufacturer Tesla Motors, doggedly continued to manufacture hybrid and electric cars that ignored the issue. One motive for Tesla becomes apparent when you read their 2011 SEC filings: The safety feature “could negatively impact consumer interest in our vehicles.” Nissan Leafs made a half-hearted effort by installing a grating boop-beep sound—but featured a mute button, something the new law wouldn’t allow. Toyota and Hyundai have been more proactive: This 2010 Japanese video shows Toyota tinkering with the Jetsons-style sound that is now standard on 2012 Priuses.

Car manufactures have no other option than to see this as a critical issue. If they don’t, it represents a serious failure of risk management. And those are never cheap.

Reporting on food safety issues is not the most glamorous topic and, truthfully, it’s sometimes disgusting. But it’s also something that’s important and necessary. Investigative reporting, no matter what the field, requires persistence, fearlessness and a little bit of trickery. Here are a few examples of the best investigative reporting on food safety:

• “What the USDA Doesn’t Want You to Know About Antibiotics and Factory Farms” — This piece, published on MotherJones.com, explores the link between antibiotic-resistant infections and factory animal farms. It seems the USDA doesn’t want people to see this scathing report, which may explain why they’ve removed it from the website countless times. It is back up — for now.
• “America’s Dangerous Food-Safety System” — Author Eve Conant writes about how the lack of inspectors and budget cuts is constantly putting Americans at risk of illness and death. The article is shocking in itself, but also includes some hard-to-believe facts taken from a Newsweek investigation into the matter.
• “On the Menu, but Not On Your Plate” — Reporters with the Boston Globe found that certain fish being sold at area seafood restaurants were not the same variety as the menu claimed them to be. Many items on the menu were substituted with cheaper, less nutritional types of fish. Also known as “food fraud,” it has become somewhat of an epidemic and not only cheats consumers out of money, but exposes them to possible health risks. (We covered the topic in the April issue of Risk Management.)
• “How Washington Went Soft on Childhood Obesity” — As the article, published on Reuters.com, explains, “In the political arena, one side is winning the war on childhood obesity — the side with the fattest wallets.” Indeed, as more and more food and beverage companies engage in aggressive lobbying, plans to reduce sugar, salt and fat in food marketed to children have been cut, with little to no explanation. Oh, and did I mention that in April Congress declared pizza a vegetable? Money talks as generation after generation of Americans become heavier and less healthier.

The complete list of the best reporting on food safety is available on ProPublica’s website.

“From the time I took the Coca Cola driver’s testimony and obtained the company’s inadequate cell phone driving policy, I knew we had a corporate giant with a huge safety problem on our hands,” said Thomas J. Henry, one of the plaintiff’s attorneys.

Coca-Cola disagreed with the verdict and, in a statement, expressed its plans to appeal:

“This case was tried because the parties could not come to an agreement on damages. We have accepted responsibility for the accident. We understand that this verdict is a response to a plea from plaintiff’s counsel to the jury to ban all cell phone use while driving.

“Coca-Cola Refreshments’ cell phone policy, which requires the use of a hands-free device when operating a motor vehicle, is completely consistent with, and in fact, exceeds the requirements of Texas law. Coca-Cola Refreshments values the well-being of all citizens in the communities in which we operate. There is no discernible connection between the damages awarded in this case and the injuries sustained by the plaintiff. Although we respect the verdict of the jury, we plan to appeal.”

Nevertheless, the case does emphasize the need for all companies to have a clear cell phone use policy for their drivers. In a recent blog post, Matt Howard, CEO of ZoomSafer, a mobile phone safety software provider, outlined three important lessons the case can teach fleet managers. First, when accidents happen, plaintiffs will sue (and obviously judgments could get costly). In addition, policies cannot exist only on paper and they must be enforced. Hoffman concludes:

This case emphasizes just how serious the risk is – and that all employers can be vicariously implicated if they fail to manage and monitor how employees are using mobile devices while driving. Employers who want to minimize liability as much as possible must institute risk management programs to actively or passively enforce cell phone use policies.

The risks of distracted driving have been well documented and with more and more states enacting some sort of ban on cell phone use while driving, either for talking, texting or both, cell phone policies are quickly becoming a necessity. And as this case shows, it’s not just about legal compliance or driver safety–it can also have a substantial financial impact on your company.

There are no shortage of Wall Street firms that want to strip some teeth from the Dodd-Frank financial reform act. But energy companies also have some incentive to parse out at least one key provision.

The item at issue, Section 1504 of Dodd-Frank, centers on transparency. Specifically it would, according to Bloomberg Businessweek, use SEC rules to force publicly traded energy/mining companies “to make timely, detailed disclosures of the tax and royalty payments they make to governments worldwide.” What is the specific arrangement agreed upon by, say, ExxonMobil and the government of Chad for the energy giant to pump oil from the resource-rich nation?

Businessweek notes how Chad, specifically, had much of its wealth pilfered by corrupt leadership. Proponents of Section 1504 hope that mandating greater transparency of these deals will keep the blame-less citizens of poor, resource-rich countries from having their country’s resources sold away to the highest bidder for the personal gain of their crooked rulers.

Now, Exxon and most other big energy companies say they aren’t against this concept in principle. As much as history has certainly helped them benefit from he actions of corrupt governments in the developing world, they have realized that transparency and “information sharing can improve governance,” according to Businessweek.

Their main issue seems simple: they already do this.

Large oil and mining companies already participate in a voluntary regime, the Extractive Industries Transparency Initiative. Executives at ExxonMobil, the world’s biggest oil company, have sat on the Initiative’s board. Reformers have been frustrated by the slow and incomplete nature of the disclosures required by EITI; Dodd-Frank is a chance to push through tougher rules. Lobbyists are now urging the SEC to delay action or to narrow the kinds of disclosures that would be required. The American Petroleum Institute, the industry’s Washington arm, is leading the push, but all major oil and mining companies have joined in on their own. (Newmont Mining is the only major exception; it has expressed support for the 1504 rules.)

The question is whether or not this voluntary effort is enough.

Those in favor of Section 1504 say that the mandatory regulations go further and would better ensure that everything is reported and those living in poor, resource-rich nations are protected.

That is probably hard to argue with.

Big Oil, however, argues that the rules would be overly onerous.

The companies argue that the proposed rules would be “excessively burdensome,” in the words of Patrick Mulva, ExxonMobil’s vice president and controller. Big Oil’s “greater concern,” as Mulva wrote in a letter to the commission, is that 1504 would have a “detrimental effect” on the “global competitiveness of U.S. companies.” The fear is that Chinese, Russian, Brazilian, and Indian oil and mining companies, lacking qualms and unburdened by Dodd-Frank rules, would exploit the financial disclosures made by their Western competitors to outbid them—and potentially persuade leaders of resource-rich countries in the developing world to stay away from U.S. companies altogether.

Like all things with the rolling implementation of Dodd-Frank, I’m sure that there will be more to come on this … slowly.

Perhaps most interestingly to me, however, the article also compares this provision to the Foreign Corrupt Practices Act, which was passed by Congress in 1977 to stamp out the rampant bribery of foreign government office that goes on between U.S. companies operating abroad.

A generation ago, Congress insisted when it passed the Foreign Corrupt Practices Act that U.S.-headquartered multinationals would be held to a special standard, forgoing bribery even where it was commonplace abroad, and would have to learn how to compete with unscrupulous Russian, Chinese, or French companies. Not only did American business survive and thrive after the law was passed, but forward-thinking American executives learned to use the law to fob off outstretched hands and avoid unsavory rents they wouldn’t have wished to pay in the first place.

That may be true.

But companies are now facing an increased enforcement of the FCPA. We just finished edited a story for our June issue about how companies can insure themselves against Justice Department FCPA investigations. There are a lot of nuanced, policy-language questions that come into play if a claim is triggered. It is some very arcane stuff, frankly.

But what is notable is seeing how the enforcement has increased. Here are two charts that tell the story.

The 2012 “Report to the Nations on Occupational Fraud & Abuse” found the following:

• Fraud schemes are extremely costly. The median loss caused by the occupational fraud cases in the study was $140,000. More than one-fifth of these cases caused losses of at least $1 million.
• Schemes can continue for months or even years before they are detected. The frauds in the study lasted a median of 18 months before being caught.
• Tips are key in detecting fraud. Occupational fraud is more likely to be detected by a tip than by any other method. The majority of tips reporting fraud come from employees of the victim organization.
• Occupational fraud is a global problem. Though some findings differ slightly from region to region, most of the trends in fraud schemes, perpetrator characteristics and anti-fraud controls are similar regardless of where the fraud occurred.
• High-level perpetrators do the most damage. The median loss among frauds committed by owner/executives was $573,000, the median loss caused by managers was $180,000 and the median loss caused by employees was $60,000.
• Small businesses face increased risk. The smallest organizations in the study suffered the largest median losses. These organizations typically employ fewer anti-fraud controls than their larger counterparts, which increases their vulnerability to fraud.

The report goes on to break down occupational frauds by category, duration of fraud based on scheme type, size of victim organization and initial detection of occupational frauds. Here is the breakdown in graphical form:

The full report can be downloaded here.

There is no question that the computers controlling the nation’s critical infrastructure (the power grid, financial system, water treatment facilities, etc.) must be protected from potential cyber attacks launched by domestic or foreign enemies. But who’s responsibility is it to pay for this security, business leaders or national security organizations?

Some are backing stricter government regulation of cybersecurity, which has been proposed in the Lieberman-Collins legislation, while the majority of business leaders oppose this idea.

“The major concern is the vast regulatory structure that would be set up at the Department of Homeland Security,” says Larry Clinton, president of the Internet Security Alliance, an association of major U.S. companies with interests in the cybersecurity debate. It’s a concern not shared by Stewart Baker, a top cybersecurity official in the Bush administration who says he generally holds pro-business and anti-regulation views. “I see a big conflict between the desire to avoid regulation and the desire to protect national security,” Baker says. “I come down on the national security side of that debate.”

There is also disagreement as to whether private industry, which owns most of the U.S.’s infrastructure, is even capable of defending themselves against the increasing sophistication of external (or even internal) attacks. Many feel the government, with its cyber intelligence, could do a much better job. But again, that would require businesses to endure endless cyber regulations. As of now, many business leaders feel that is too much to handle (sounds similar to complaints about Dodd-Frank?). But when the electric grid is knocked offline in a cyber attack, they may feel differently. At that time, however, it could be too late.

As corporate boards and senior executives continue to deny the potential risks and consequences of cyber threats, we are indeed, as NPR put it best, fighting “a war without an army.”

When it comes to security and risk management, don’t try to address every possible threat. Instead, pick your battles: Implement better access control, vet cloud providers, safeguard mobile devices, educate users and build more secure software, for starters.

They surveyed nearly 1,000 IT security pros and many of the findings are fascinating. The following four graphs are just a small sampling. You can download the full, 44-page report at their website (link above). Most interesting to me is the top two bars in the second chart: security executives now, finally, consider internal users as just a large threat as they do cybercriminals.

For companies it was one of the most dramatic lessons in the dangers of excessive risk taking and showed just how much damage can be done — to a reputation, the environment and the families of those who died in the explosion — when a company displays a “pattern of neglect and corner cutting.” We’ve looked at the risk management lessons of the spill, the events leading up to the Deepwater Horizon explosion, how the rig’s blowout preventer failed, and how conflicts of interest hinder offshore drilling regulation.

Now — after a Greenpeace Freedom of Information Act request has finally uncovered some previously unreleased images — we look at the heart-breaking ecological damage of the spill.

Here is what is presumably a government worker cleaning up some of the dead animals that were killed by the oil that filled the Gulf of Mexico. Mother Jones has a gallery of many more explicit photos showing just how badly some endangered sea turtles were covered in crude.

At Tuesday’s Advisen Casualty Conference here in New York, a hot topic was that of trends within the industry. It was clear that Stan Galanski, president and CEO of Navigators, had put some thought into the topic, coming up with the following trends he feels are important to the industry:

• Globalization — “There is a need for global product liability coverage,” said Galanski. We need to look no further than the UK Bribery Act and the Foreign Corrupt Practices Act (the recent news involving Walmart is a good example).

• Miniaturization — “We’ve gone from records to 8-tracks to CDs to iPods to the cloud,” said Galanski, talking about how the density of electronic components can be construed as a risk. He referenced the case of Intuitive Surgery, Inc., the maker of the da Vinci surgical robot, which has allegedly caused numerous injuries and at least one death — that of a 24-year-old woman who was undergoing a hysterectomy when the robot caused burns to an artery and her intestines, which led to her death two weeks later.

• Disintermediaton — By this, Galanski means the removal of intermediaries in a supply chain. “So what exposures are risk managers picking up with the absence of these people and/or businesses?” Though disintermediation may be more cost effective, it comes with added risk.

• Personalization — When you open iTunes, the application suggests songs you may like based on your recent purchases or downloads. The same goes for Amazon. When you log into the site, it suggests new books or apparel you may want to purchase based on past buying habits. “It’s a great feeling as a consumer, but as a risk manager it brings concerns about your business’ laptops and computers.”

These are indeed interesting observations of trends, but they are, in fact, only one man’s opinion. But we learn by sharing. With that in mind, I ask you what trends you’re noticing within the casualty industry?

Many companies today are turning towards the integration of work-teams into the traditional office environment. Managers are hopeful that this new work structure will help the organization improve in areas of efficiency, production and effectiveness. The alignment of employees into individual work teams is a relatively new concept in the United States.  Although it is growing in popularity within many different organizations, there is still not enough historical information gathered in order to establish a coherent set of rules, values or formulas. Companies adopt the concept and it is uniquely applied to each work situation since we are essentially still in the learning process when it comes to developing strong work teams within an organization.

Teamwork can be exciting and can lead to some of the most rewarding experiences of an individual’s working career. It can also be frustrating, difficult, and challenging, however. Any change to the way that a company operates internally can also be a potential risk to it’s reputation in the marketplace. Aligning your staff into a more team-focused environment may mean better collaboration and communication behind the scenes, but the shift in roles could also expose your employees to negative perception. Competitors’ ears seem to perk up just enough to catch wind of organizational changes and opportunities to poke holes in a company’s reputation. Most difficulties can actually be predicted and with the use of proper tools, can be tackled and overcome. Recently, Billy Beane, the general manager of Major League Baseball’s Oakland Athletics and the subject of the best-selling book and Academy Award-nominated film Moneyball discussed  how risk and data play a part in running a baseball team. In his discussions, Beane speaks about how using risk management techniques had helped him develop and lead a successful baseball team. If risk management skills can benefit a professional sports team, then we can apply the strategies of successful sports teams to help risk management and insurance professionals in developing successful work team environments within their own organizations.

The design of work teams is based on the theory of synergy. The productivity of the whole is greater than the sum of its parts. This is a concept that sounds like something I remember hearing many times, beginning with the first practice at t-ball at age five. Teams that are well-functioning offer mutual support of its members, which helps increase morale and generally brings out the best in its members. These are positive by-products that any manager would want to see among baseball players or office employees. Both on the field and behind a desk, the creation and maintenance of successful teams comes down to effective management, strong leadership and clear communication.

MANAGEMENT starts from the top down. Key decisions on the baseball field start well in advance of opening day. The entire baseball season starts at the top with the owners — in the business world, we call them high-level executives. Deciding to incorporate work teams is a major organizational change. It needs to be well-supported at the top and clearly communicated down the lines. When the foundations and concepts are established at the senior management level, employees are more apt to buy into the change. In the story of Moneyball, the coach desperately wanted to build ateam with big names and high salaries, but that was not the message that Billy Beane had in mind. Using a theory based on data analytics and risk management, Beane could not see paying for skill sets that didn’t correlate with winning. It was his unique strategy and in order for it to work, it had to be established at the top and carried out and supported by the lower level managers and coaches.

ACCOUNTABILITY is crucial. Baseball players know exactly what is expected of them. They know what their responsibilities are and they know how they fit into the big picture. A pitcher knows that a bad pitch will impact the catcher’s performance. The same rules apply when talking about work teams in an office environment. Establishing accountability will also hold very strong to the success of the ultimate change. Specific objectives are important not only to identify the achievement goal, but also to pinpoint who will be responsible for these changes. The human resource department will most likely have to develop new approaches towards incentive pay and bonuses, and depending on the strategic nature of the objectives, new performance metrics may also be necessary.

COMMUNICATION that is clear and consistent is the absolute key to success. Managers need to communicate with employees who are affected by an organizational change, not at them. For any change efforts to be effective, there must be a level of buy in from those who are affected by it. Early involvement and communication are two ways this can be accomplished. It is important to recognize the value of involving employees when planning change through various methods, including task force committees, focus groups, surveys hotlines or conversations, both formal and informal. Ball clubs also communicate by collecting feedback from those on the field. After each game, players go into the locker room, where the managers, coaches and players all talk about what went well and what didn’t. The team’s performance is analyzed and teammates offer recommendations on how to do better next time. Much like players spend hours watching game tapes, organizations should be stepping back to review and evaluate the organization’s performance amidst such a change. Seeking feedback from their employees is another way to analyze the situation. Asking people how they feel and what they think makes people feel more involved. When employees feel involved, they’re more accepting of change and feel more support for the change initiative.

Managers of baseball teams have relatively easy ways of measuring success. If the team makes it to the playoffs, it’s a pretty clear sign that the team is working well together. When ticket sales are low, and the team finishes the season with a losing record, owners understand immediately that the team is seriously lacking. In business, we don’t have the luxury of such cut and dry performance feedback, but we can rely on reputation as a litmus test for success. Don’t forget that internal changes don’t just impact the employees. Using strategies from the field to develop strong workteams will help to successfully manage your organization.